VALUATION 


Of  the  Properties  of 

The  Cleveland  Electric  Railway  Company 

and 

The  Forest  City  Railway  Company 

by 

Hon.  R.  W.  Tayler,  Arbitrator. 


T  iw, 


er 

£ 


Value  of  the  property  of  The  Cleveland  Electric  Railway 
Company  on  January  1,  1908,  and  of  The  Forest  City  Rail¬ 
way  Company  on  March  25,  1908,  as  fixed  and  determined 
by  Hon.  R.  W.  Tayler,  Arbitrator. 


Schedule. 

Cleveland 

Electric. 

Forest  City. 

Total. 

A— Track  . $  4,839,326.62  $  520,627.87  $  5,359,954.49 

B — Pavement  .... 

2,052,233.37 

147,397.38 

2,199,630.75 

C— Cars  . 

3,202,628.59 

538,984.11 

3,741,612.70 

D — Land  . 

1 ,379,089.60 

18,429.24 

1,397,518.84 

E — Buildings  .... 

1,024,752.13 

39,9 37.37 

1,064,689.50 

F — Overhead  con¬ 
struction  .  .  . 

G — Return  circuit 

1,225,293.68 

115,981.15 

J  175,297.44 

1,516,572.27 

H — Power-sta’s  .  . 

2,695,019.21 

196,198.31 

2,891,217.52 

I — Storage-bat’ries 

352,363.29 

71,229.63 

423,592.92 

J — Shop  tools .... 

73,087.44 

47,148.25 

120,235.69 

K — Stores  . 

363,944.62 

363,944.62 

L — Misc.  rol.  stk. 

188,136.41 

6,091.16 

194,227.57 

M — Other  items.  . 

44,259.24 

44,259.24 

Total . $17,511,856.11  $1,805,600.00  $19,317,456.11 

Franchises  . 

3,615,843.89 

3, 615,843.89 

Total . $21,127,700.00  $1,805,600.00  $22,933,300.00 


3 


Capital  Value  of  The  Cleveland  Railway  Company,  as 
fixed  in  Section  16  of  Ordinance  No.  16238- A,  passed  by  the 
Council  of  the  City  of  Cleveland  December  18,  1909. 


The  value  of  the  property  of  The  Cleveland 

Electric  Railway  Company  is  agreed  to  be.  . $21,127,149.53 
Agreed  addition,  to  equalize  stock  value .  550.47 

Total  value  of  Cleve.  Elec,  property. ..  .$21,127,700.00 
To  which  must  be  added,  as  the  value  of  The 


Forest  City  property  .  1,805,600.00 

Total  value  of  property . $22,933,300.00 


And  there  is  added,  for  interest  accrued,  but 
used  to  equalize  stock  value  and  not  to  be 
paid,  said  interest  being  the  equivalent  of 
9  per  cent,  upon  $12,870,000  for  the 


period  ending  January  1,  1910 .  1,158,300.00 

Total  . $24,091,600.00 

From  this  aggregate  is  deducted: 


1.  Bonded  indebtedness . $8,128,000 

2.  Floating  indebtedness  as  of  Jan¬ 

uary  1,  1908  .  1,288,000 


The  total  of  these  sums  is . $  9,416,000.00 


Leaving  “for  residue  of  capital  value,”  i.  e.,  for 

capital  stock  . $14,675,600.00 


4 


Joint  letter  of  City  Council  and  Company,  submitting 
differences  to  Judge  Tayler,  as  final  arbitrator. 


October  1,  1909. 

Hon.  R.  W.  Tayler, 

Cleveland,  Ohio. 

Dear  Sir : — 

The  City  Administration,  the  City  Council  and  The 
Cleveland  Railway  Company  unite  in  inviting  you  to  value 
the  property  of  The  Cleveland  Railway  Company  as  of  Jan¬ 
uary  1st,  1908,  except  that  portion  acquired  from  The  Forest 
City  Railway  Company,  which  is  to  he  valued  as  of  March 
25th,  1908,  and,  also,  having  reached  a  conclusion  as  to  the 
value  of  the  property,  to  fix  the  maximum  rate  of  fare  which 
may  be  charged  by  The  Cleveland  Railway  Company  within 
the  term  of  the  proposed  so-called  Tayler-plan  grant. 

If  you  decide  to  accept  this  public  trust,  the  City  Ad¬ 
ministration,  the  City  Council  and  The  Cleveland  Railway 
Company  will,  as  promptly  as  possible,  unite  in  submitting 
to  you  for  your  decision  any  other  questions  upon  which  thev 
may  be  unable  to  agree,  to  the  end  that  the  ordinance,  com¬ 
pleted  by  your  arbitration  upon  these  disputed  matters,  may 
be  submitted  to  the  people  at  a  referendum  election  at  as 
early  a  date  as  practicable. 

Respectfully, 

THE  COMMITTEE  OF  THE  WHOLE  OF  THE 
CITY  COUNCIL  OF  CLEVELAND, 

By  Peter  Witt. 

THE  CLEVELAND  RAILWAY  COMPANY, 

By  Horace  E.  Andrews, 

President. 


5 


Judge  Tayler’s  Reply. 


October  5,  1909. 

To  The  Cleveland  Railway  Company, 

Cleveland,  Ohio. 

Gentlemen : — 

I  am  pleased  to  receive  your  letter  of  October  4th,  in 
reply  to  mine  of  the  same  date,  touching  the  desire  of  your¬ 
selves  and  of  the  Council  of  the  City  of  Cleveland  to  have 
me  act  as  arbitrator  in  connection  with  the  settlement  of 
your  differences  as  to  the  proposed  street  railway  ordinance. 

I  stand  ready  to  serve  as  suggested  at  the  earliest  prac¬ 
ticable  moment. 

Yours  truly, 

R.  W.  Tayler. 


6 


Judge  Tayler’s  Written  Decision. 


Cleveland,  O.,  Dec.  17,  1909. 

To  the  Council  of  the  City  of  Cleveland 

and  The  Cleveland  Railway  Company, 

Cleveland,  Ohio. 

Gentlemen : — 

I  make  the  following  report,  in  reply  to  your  commun¬ 
ication  of  October  5th,  submitting  to  me,  as  an  arbitrator, 
the  decision  of  certain  questions  involved  in  the  settlement 
of  the  street  railway  situation  in  this  city ;  and,  also,  my 
report  on  the  question  submitted  to  me  by  The  Municipal 
Traction  Company,  The  Forest  City  Railway  Company  and 
The  Low  Fare  Railway  Company,  respecting  the  obligation 
arising  out  of  the  guarantee  of  the  stock  of  The  Forest  City 
Railway  Company  and  of  so  much  of  the  stock  of  The  Cleve¬ 
land  Railway  Company  as  was  sold  through  the  Municipal 
Traction  Company  and  by  it  guaranteed  in  certain  terms: 

First:  The  value  of  the  physical  property  of  The  Cleve¬ 
land  Electric  Railway  Company,  as  of  January  1st,  1908, 
was  $17,511,305.64. 

Second:  The  value  of  the  Company’s  franchises,  as  of 
that  date,  was  $3,615,843.89. 

Third :  The  total  value  of  all  the  property  of  The 
Cleveland  Electric  Railway  Company  I  find,  therefore,  to  be 
$21,127,149.53,  being  something  more  than  a  million  dollars 
less  than  that  which  was  found  by  the  Goff- John  son  ap¬ 
praisal. 

Fourth :  I  allow  nothing  for  good  will.  A  street-rail¬ 
way  company  which  has  a  monopoly,  and  especially  if  it  has 
a  franchise  value  remaining,  can  have  no  good-will  value. 

Fifth :  I  allow  nothing  for  going  value,  except  in  so 
far  as  that  is  the  result  of  the  necessary  expenditure  of 
money  in  building  the  road,  acquiring  its  land,  power-houses 
and  equipment,  and  putting  them  into  successful  operation. 


7 


The  expenditures  for  these  purposes  are,  and  necessarily 
must  be,  included  in  the  valuation  of  the  physical  property. 

Sixth :  I  offset  the  values  of  suburban  grants,  whatever 
they  may  amount  to,  against  the  burdens  of  suburban  con¬ 
tracts,  to  whatever  extent  they  may  exist,  for  the  reason  that 
all  the  territory  covered  by  the  Cleveland-Electric  lines  is  one 
homogeneous  community,  destined  soon  to  become  one  mu¬ 
nicipality,  in  which  a  zone  system  will  be  intolerable. 

Seventh:  I  am  of  opinion  that  there  is  a  moral,  and 
perhaps  a  legal,  obligation  on  the  community  in  connection 
with  the  guarantee  by  The  Municipal  Traction  Company  of 
stock  of  The  Forest  City  Railway  Company  and  of  stock 
of  The  Cleveland  Railway  Company  sold  by  The  Municipal 
Traction  Company.  In  view  of  the  fact  that  the  settlement 
recommended  by  me,  should  it  become  operative,  will  make 
the  stock  of  The  Cleveland  Railway  Company,  in  my  opinion, 
intrinsically  worth  par,  I  recommend  that  the  obligation 
created  by  the  guarantee  be  adjusted  by  the  payment  to  the 
persons  who  originally  purchased  the  same  on  the  faith  of 
the  guarantee  of  an  amount  equal  to  seven  and  one-half  per 
cent  of  the  par  value  of  such  guaranteed  stock  so  owned,  and 
that  the  principle  be  applied  to  fractional  shares  according  to 
the  actual  amounts  paid  thereon,  such  payments  to  be  in  full 
satisfaction  of  all  liability  under  the  guarantee. 

I  fix  the  amount  at  seven  and  one-half  per  cent  because, 
prior  to  October  1st,  1908,  all  such  stockholders  had  received 
interest  or  dividends  at  the  rate  of  six  per  cent  per  annum. 

Something  less  than  ten  per  cent  of  the  guaranteed 
stock  has  been  sold  by  the  original  purchasers.  To  what 
extent,  if  any,  these  former  owners  of  such  stock  may  be 
entitled  to  any  reimbursement  under  the  guarantee  I  am 
willing  to  consider  hereafter.  The  amount  involved  can  in 
no  event  be  a  very  large  sum,  as  less  than  ten  per  cent  of  all 
the  guaranteed  stock  has  changed  hands. 

The  practical  result  of  the  reduction  in  the  value  of 
The  Cleveland  Railway  Company  property  will  be  to  make 

8 


the  stock  of  that  Company  not  having  an  origin  in  The 
Municipal  Traction  Company’s  guarantee  worth,  as  of  Jan¬ 
uary  1st,  1910,  par  and  one  and  one-half  per  cent.,  being  the 
amount  accruing  to  such  stockholders  for  the  quarter  ending 
October  1st,  1908,  and  thus  equalizing  for  that  period  those 
stockholders  with  the  stockholders  whose  stock  came  under 
the  guarantee. 

As  to  the  guaranteed  stock  still  in  the  hands  of  the 
original  purchasers,  it  will  be  worth,  as  of  January  1st,  1910, 
par  and  seven  and  one-half  per  cent. 

Eighth  :  The  initial  rate  of  fare  should  be  three  cents 
and  one  cent  for  a  transfer,  without  rebate ;  and  the  maxi¬ 
mum  rate  should  be  four  cents  for  a  single  fare,  seven  tickets 
for  twenty-five  cents,  and  one  cent  for  a  transfer,  without 
rebate. 

Ninth:  I  approve  the  suggestion  that,  if  consents  of 

abutting  property  owners  are  secured,  the  Company  be  re¬ 
quired  to  extend  its  line  on  Lorain  Avenue  to  the  city  limits, 
if  no  fair  arrangement  can  be  made  with  the  interurban  com¬ 
pany  for  the  use  of  its  tracks. 

Yours  truly, 

R.  W.  Tayler. 

P.  S.  Adding  to  the  sum  of  $21,127,149.53,  found  as 
the  total  value  of  The  Cleveland  Electric  property,  $1,805.- 
600,  the  value  agreed  upon  of  The  Eorest  City  property,  we 
have  a  total  of  $22,932,749.53  for  the  combined  properties. 

R.  W.  Tayler. 


Judge  Tayler’s  oral  announcement  of  his  decision, 

December  18,  1909. 


United  States  Circuit  Court  Room,  Saturday,  Decem¬ 
ber  18,  1909,  9:30  A.  M. 

JUDGE  TAYLER : 

I  have  been  requested  by  the  council  of  the  City  of 
Cleveland  and  by  the  Cleveland  Railway  Company  to  act  as 
arbitrator  and  determine  the  value  of  the  property,  as  of 
January  1,  1908,  of  The  Cleveland  Railway  Company,  the 
proper  disposition  of  what  is  known  as  the  contract  with 
East  Cleveland,  the  fair  and  just  disposition  of  the  situation 
arising  out  of  the  relations  of  the  railway  company  with  the 
interurban  lines  which  operate  on  Lorain  Avenue  between 
the  present  city  limits  and  the  former  city  limits,  to  determine 
what  the  maximum  rate  of  fare  in  the  proposed  ordinance 
ought  to  be,  and,  at  the  request  of  those  parties  and  of  the 
Municipal  Traction  Company,  the  Forest  City  Railway  Com¬ 
pany  and  the  Low  Fare  Railway  Company,  to  determine 
whether  or  not  there  is  a  moral  obligation  upon  the  com¬ 
munity  to  make  good  the  guarantee  of  the  Municipal  Trac¬ 
tion  Company  to  the  purchasers  of  Forest  City  Railway 
stock  and  the  purchasers  of  Cleveland  Railway  stock  after 
the  Municipal  Traction  Company  went  into  possession  as 
lessee  of  all  of  the  property,  and,  if  any  obligation  arises 
which  can  be  measured  in  monev,  that  that  sum  be  added  to 
the  capital  value  of  the  whole  property  upon  which  interest 
is  to  be  paid  out  of  the  earnings  derived  from  the  operation 
of  the  property;  and  all  of  these  questions  I  am  ready  to 
answer. 

I  feel  as  if  I  ought  to  say  that  while  the  labor  and  re¬ 
sponsibility  laid  upon  me  by  this  inquiry  were  not  pleasant 
or  desired,  yet  that  all  of  the  parties  who  have  participated 
in  the  hearings,  have,  without  any  important  exception  at  all, 
aided  me  and  facilitated  the  prosecution  of  the  inquiry  with 


an  expedition  and  harmony  that  were  hardly  to  be  expected 
under  all  of  the  surrounding  circumstances,  and  the  result 
is  that  we  come  to  the  present  moment  without  any  embar¬ 
rassments  arising  out  of  the  absence  of  those  things  to  which 
I  have  just  referred. 

The  Goff-Johnson  appraisal  gave  a  value  to  the  Cleve¬ 
land  Electric  property  of  something  over  twenty-two  mil- 
lion  dollars,  and,  by  assent  or  agreement,  a  value  to  the 
Forest  City  property  of  one  million,  eight  hundred  and  five 
thousand,  six  hundred  dollars,  and  it  has  been  agreed  that  the 
latter  value  should  remain  unchanged.  There  are  reasons, 
which  I  need  not  enumerate  here,  why  that  conventional 
agreement  should  remain. 

If  the  property  of  the  Cleveland  Electric  Railway  Com¬ 
pany  could  be  valued  by  what  we  might  call  the  historical 
method,  then  we  would  have  proceeded  to  do  so,  because  the 
Forest  City  property  was  valued  by  that  method.  Its  books 
were  open,  and  all  of  the  cost  of  the  property  and  all  of  the 
items  entering  into  the  valuation,  whether  property  or  not 
entering  there,  were  disclosed  and  known. 

Now,  proceeding  first  to  a  statement  of  the  general  prin¬ 
ciple  upon  which  the  value  of  the  physical  property  of  the 
Cleveland  Electric  Railway  Company — using  that  term  as 
distinguishing  that  part  of  the  property  which  was  not  the 
property  of  the  Forest  City  Railway  Company — I  want  to 
say  this:  That  the  guiding  and  controlling  principle  which, 
having  been  laid  down,  finds  easy  application  to  the  several 
items  which  ought  to  go  into  the  value  of  the  Cleveland 
Electric  property,  is  that  we  should  arrive  at  the  just  and 
true  value  of  the  investment  of  the  company,  as  shown  by 
a  physical,  appraisable  and  existing  property.  That  would 
provide  for  a  determination  of  that  value  by  determining  the 
cost  of  reproducing  the  property  in  existence  on  the  first  day 
of  January,  1908,  with  suitable  deductions  for  depreciation. 

The  application  of  this  principle  excludes  consideration 
of  investments  whose  product  has  disappeared,  even  though 


11 


they  may  have  been,  at  the  time  when  made,  such  as  would 
pass  into  capital  account,  and  even  though  they  had,  when 
they  disappeared,  more  than  scrap  value.  As  illustrating  that, 
we  may  refer  to  the  transformation  from  cable  to  electric 
traction.  Much  was  contended  for  a  contrary  view.  That 
contrary  view  might  have  been  persuasive  if  the  valuation 
was  being  made  by  a  consideration  of  the  historical  aspect 
of  the  property.  That  would  involve  a  determination  from 
the  books  and  otherwise  of  the  actual  investment  from  the 
beginning  of  the  property  and  the  amount  of  the  net  returns 
received  from  the  investment.  This  might  or  might  not  affect 
substantially  the  final  result,  but  such  a  method  is  neither 
available  now  nor  prescribed  as  the  method  of  present  pro¬ 
cedure. 

A  large  amount  of  testimony  was  taken  on  this  question 
of  the  physical  value  of  the  property,  and  of  course,  it  has 
all  been  listened  to  carefully  and  considered  as  carefully  as 
I  could  give  consideration  to  it.  As  to  the  physical  property, 
I  arrive  at  a  determination  of  its  fair  value  by  determining, 
first,  what  is  what  we  may  call  the  inventory  value  of  the 
property ;  that  is  to  say,  a  determination  of  quantities  of 
things  which  have  value,  and  of  the  amount  of  labor  ex¬ 
pended  in  putting  those  physical  articles  into  the  condition 
and  position  and  fitness  for  use  which  they  possessed ;  and 
then,  to  add  to  that  the  cost  of  those  things  which  are  vitally 
and  necessarily  present  in  the  completed  thing  itself.  These 
items  of  cost  are  as  much  a  part  of  the'  value  of  the  thing 
which  is  in  position  and  being  operated  as  the  rails  or  the 
ties  or  any  other  visible  physical  object  upon  which  the 
eye  rests. 

Now  referring  first  to  this  inventory  value,  so  called, 
which,  for  want  of  any  more  accurate  term,  I  use  in  the 
sense  in  which  I  have  just  defined  it,  I  have  come  to  the  con¬ 
clusion  that,  while  the  claim  on  the  one  side  was  that  some 
of  these  things  ought  to  be  valued  higher  than  by  the  Goff- 
Johnson  appraisal,  and  a  very  large  amount  of  testimony 
and  very  urgent  arguments  were  presented  to  the  effect  that 


12 


the  value  ought  to  be  less,  I  am  constrained  to  come  to  the 
conclusion  that  in  the  midst  of  all  this  speculation  and 
variety,  not  variety  alone  between  the  contending  parties  but 
variety  on  one  side  of  the  same  thing  viewed  at  different 
times,  the  safest  and  justest  basis  to  determine  the  whole 
physical  value  is  to  be  found  by  taking  the  inventory  of  the 
Goff- Johnson  appraisal. 

Now,  I  do  not  do  that  lightly  or  without  real  considera¬ 
tion  of  the  testimony  that  was  here  given.  When  the  Goff- 
Johnson  appraisal  was  being  made,  those  who,  on  the  part 
of  the  city,  were  engaged  in  that  work,  had  resting  upon  them 
a  public  obligation  to  lay  no  larger  burden  on  the  community 
than  rightfully  ought  to  be  laid  upon  it,  because,  in  its  essence, 
the  burden  under  the  plan  proposed  in  April,  1908,  was  pre¬ 
cisely  of  the  same  character  as  that  which  is  to  be  laid  upon 
the  public  under  the  ordinance  now  in  contemplation.  Be¬ 
sides  that,  and  affecting  that,  at  the  time  when  the  Goff- 
Johnson  appraisement  was  made,  there  was  resting  upon 
those  who  represented  the  city'  a  real  burden  involved  in  the 
fact  that  they  were  going  to  assume  the  responsibility  of 
operating  the  property  on  a  3-cent  rate  of  fare,  and,  there¬ 
fore.  there  was  every  kind  of  a  personal  influence  in  their 
breasts  to  make  the  valuation  as  low  as  it  fairly  might  be,  be¬ 
cause  they  were  responsible  to  the  community,  not  only  to 
perform  their  duty  in  getting  as  low  a  valuation  as  was 
proper,  but  they  were  responsible  because  they  had  arranged 
for  3-cent  fare  on  all  of  the  lines,  and  thus  their  own  per¬ 
sonal  attitude  and  relation  to  the  community  were  involved. 

Xow,  another  reason  why  I  take  that,  a  reason  which 
affects  the  persuasiveness  of  the  arguments  that  are  made 
and  of  the  testimony  that  was  produced  :  This  physical  prop¬ 
erty  was  given  a  value,  independent  of  overhead  charges,  of 
fourteen  million  and  three  hundred  and  some  thousand  dol¬ 
lars.  An  overhead  charge  of  about  five  per  cent  was  allowed 
on  top  of  that.  It  is  that  $14,333,000  appraisal  or  inventory 
value  to  which  I  am  now  addressing  myself.  That  valuation 
which  was  then  made,  about  the  time  when  the  valuation  was 


13 


to  date,  was  again  revised,  at  the  request  of  the  council,  in 
May,  1909,  and  it  was  found  to  be  several  million  dollars  less, 
on  the  part  of  those  who  represented  the  council,  than  it  was 
a  year  before.  Of  course,  we  are  speaking  of  exactly  the 
same  thing.  It  was  not  that  it  had  depreciated,  except  in  the 
speculations  of  the  parties.  It  was  the  same,  to-wit,  the  value 
of  the  property  on  the  first  day  of  January,  1908.  That  same 
value  had  shrunk,  according  to  the  revised  estimate,  several 
million  dollars,  and  now,  upon  this  inquiry,  it  has  shrunk 
several  million  dollars  more,  with  the  inevitable  conclusion 
that  we  don’t  know  when  it  might  all  disappear  if  we  get 
far  enough  away  from  the  date  when  the  inquiry  ought  to 
have  been  made. 

Now,  I  do  not  question  the  good  faith  of  the  figures  at 
all,  but  only  that  one  set  of  figures  is  not  very  much  more  con¬ 
clusive  than  another  set  of  figures.  I  mean  that  the  state  of 
mind  and  the  way  in  which  the  subject  is  approached  affect 
the  result  of  our  determinations,  especially  when  they  are 
based  upon  an  original  hypothesis  which,  if  it  is  right,  will 
inevitably  lead  to  a  true  conclusion,  and,  if  it  is  wrong,  will 
continue  to  exaggerate  and  emphasize  the  original  error  the 
farther  you  carry  it  on,  and  the  more  hypotheses  you  rest 
upon  the  original  hypothesis. 

The  total  value,  and  this  includes  the  other  items — and  it 
was  to  an  extent  the  result  of  a  compromise,  but  even  ad¬ 
mitting  all  of  the  allowance  made  for  the  compromise,  the 
differences  are  extraordinary — of  the  Cleveland  Electric 
property,  as  allowed  for  in  1908  by  the  Goff-Johnson  ap¬ 
praisal,  was  $22,184,000.  It  is  now  insisted  that  the  same 
property,  at  the  same  time,  under  precisely  the  same  con¬ 
ditions,  is  worth  $10,000,000  less  than  it  was  found  at  that 
time  to  be  worth.  Now,  I  cannot  believe  that  that  difference 
can  arise  out  of  anything  except  mistaken  assumptions  of 
certain  unit  values  or  certain  other  controlling  facts  which, 
when  carried  out  to  their  mathematical  consequences,  produce 
widely  different  results.  I  might  multiply  reasons  for  as¬ 
suming  the  fairness  of  that  inventory  of  April,  1908. 

14 


Now,  what  other  items  of  cost  have  gone  into  that  prop¬ 
erty — this  particular  property  which  we  are  now  valuing — 
other  than  the  inventory  value?  Under  the  Goff-Johnson 
appraisal,  five  per  cent  was  allowed.  That  was  not  agreed 
to  by  the  Cleveland  Electric  side  of  the  controversy,  but  that 
entered  into  it.  Then  there  was  an  allowance  of  $2,717,000 
made  for  what  was  called  good  will,  but  which  Mr.  Johnso’n 
said  might  be  taken,  if  Mr.  Goff  desired  to  do  so,  for  over¬ 
head  charges  and  other  disputed  items,  and,  of  course,  it  was 
not  intended  to  solemnly  assert  that  the  good  will  of  the 
property  was  $2,717,000. 

A  large  amount  of  testimony  was  taken  on  the  subject 
of  overhead  charges.  Overhead  charges,  as  I  have  used  that 
term  and  applied  it  to  this  situation,  means  only  those  things 
for  which  money  has  been  spent  in  the  necessary  work  of 
constructing  the  property  and  putting  it  into  operation.  By 
putting  it  into  operation  I  do  not  mean,  in  any  substantial 
sense,  that  after  the  property  is  once  started  off  there  is  any 
significant  sum  to  be  allowed,  for  I  do  not  imagine  that  there 
is  very  much  allowance  to  be  made  for  that  in  respect  to  a 
property  of  this  character ;  but  all  I  want  to  emphasize  is  that 
every  dollar  of  overhead  charge  which  is  allowed  for  by  me 
is  a  dollar  that  is  necessarily  spent  in  the  production  of  the 
physical  property.  Now,  those  overhead  charges,  as  I  have 
simply  classified  them — I  have  not  gone  into  the  complicated 
classification  that  some  of  the  experts  have  made,  or  that 
which  is  contended  for  by  the  Cleveland  Railway  Company, 
but  I  have  divided  overhead  charges  into  two  general  classes 
— those  which  apply  to  the  specific  things,  and  those  which 
apply  to  the  enterprise  as  a  whole.  The  specific  things  which 
are  done  vary  in  the  amount  of  overhead  charges  necessary 
in  order  to  complete  the  work  ;  that  is  to  say,  the  contingencies 
and  uncertainties  and  accidents  are  larger,  for  instance,  in 
track-laying  than  they  would  be  in  the  purchase  or  construc¬ 
tion  of  cars,  or  other  things  of  that  character. 

So  that  I  have  allowed,  as  specific  overhead  charge  ap¬ 
plicable  to  track,  ten  per  cent ;  to  pavement,  three  per  cent ;  to 


15 


cars,  land,  buildings,  overhead  construction,  return  circuit, 
power-stations,  storage  batteries,  miscellaneous  rolling  stock 
and  equipment,  5  per  cent ;  and  to  the  other  items,  nothing 
specific  as  applied  to  them,  as,  for  instance,  shop  stores, 
auditor’s  stores  and  bookkeeping  credits.  The  result  of  those 
is  to  make  the  total  value  up  to  that  point  $15,175,565.28. 

Now  we  come  to  the  subject  of  the  general  overhead 
charge  which  is  applicable  to  the  whole  investment  and  can¬ 
not  be  separated  or  divided  among  the  several  items.  Some  of 
them,  if  you  took  a  separate  item  and  undertook  to  apply  the 
general  overhead  charge,  might  not  have  an  application  pecu¬ 
liar  to  that  particular  item ;  but  I  have  undertaken,  as  best  I 
can,  to  arrive  at  a  fair  statement  of  what  is  the  general  over¬ 
head  charge  in  the  construction  of  a  property  of  this  magni¬ 
tude.  For  financing,  engineering,  legal  expenses,  organization, 
administration,  superintendence,  interest  during  construction, 
delays  not  covered  by  the  specific  allowances,  consents,  litiga¬ 
tion  with  property  owners,  incidentals  and  contingencies  not 
applicable  to  specific  items,  fifteen  per  cent,  making  the  total 
actual  physical  value  $17,510,305.62. 

I  have  allowed  the  pavement  item,  because  it  comes  within 
the  general  rule  which  I  have  stated.  The  argument  for  its 
elimination  rests  upon  technical  grounds  purely,  and  I  think 
can  have  no  proper  place  in  such  a  valuation  as  we  are  now 
seeking  to  make.  It  represents  actual  money  expended.  It 
represents  absolute  addition  to  capital  value.  It  belongs  to 
capital  account,  and  in  its  depreciated  form  is  worth  all  of  the 
allowance  that  I  have  given  to  it. 

In  a  word,  and  on  the  whole,  if  I  have  any  conviction 
at  all,  derived  from  this  vast  mass  of  very  informing  testi¬ 
mony,  that  satisfies  me,  it  is  that  the  physical  property  of  the 
Cleveland  Electric  Railway  Company,  as  it  was  on  the  first 
day  of  January,  1908,  could  not  have  been  reproduced,  in  its 
then  condition,  for  less  than  $17,500,000. 

I  allow  nothing  for  going  value.  Going  value  raises  a 
question  of  definition,  and  it  is  sufficiently  disposed  of,  accord- 

16 


ing  to  my  view,  by  saying  that  it  only  has  a  value,  as  applied 
to  a  street  railroad  enterprise,  because  of  the  expense  incident 
to  organization,  superintendence,  administration,  legal  expen¬ 
ses  and  interest  during  construction ;  it  is  involved  in  the 
general  subject  of  necessary  overhead  charge,  and  arises  only 
out  of,  and  is  to  be  defined  and  limited  entirely  by,  the  money 
necessarily  expended  to  put  it  into  a  shape  in  which  it  has 
value  as  an  operating  instrumentality.  Beyond  that,  I  recog¬ 
nize  no  value  to  going  value  or  no  such  thing  as  going  value 
to  be  applied  to  a  street  railroad  enterprise. 

Nor  do  I  find  anything  properly  allowable  for  good  will, 
as  that  term  is  generally  defined.  A  street  railway  company 
which  has  a  monopoly,  and  especially  if  it  has  a  franchise 
value  remaining,  can  have  no  good  will  value. 

Now,  we  had  a  large  amount  of  testimony  on  the  subject 
of  franchise  value ;  that  is  to  say,  the  amount  which  the  prop¬ 
erty  could  earn  under  the  franchises  with  which  it  had  been 
endowed  by  the  municipality  over  and  above  six  per  cent  or 
5^4  Per  cent  return  on  all  of  the  physical  value  of  the  prop¬ 
erty,  5$4  per  cent  having  been  assumed  to  be  a  fair  average 
between  the  six  per  cent  that  might  be  paid  on  stock  and  the 
lesser  per  cent  paid  on  other  forms  of  indebtedness. 

The  city  fixed  the  franchise  value  of  the  inlying  grants 
at  a  little  less  than  three  million  dollars,  and  the  railway  com¬ 
pany  fixed  the  value  of  those  inlying  grants  at  something  over 
four  million  dollars.  I  have  had  the  advantage  of  a  large 
number  of  computations  and  a  great  deal  of  very  discriminat¬ 
ing  labor  on  both  sides  of  the  subject.  I  have  myself  com¬ 
puted  as  well  as  I  could  these  inlying  franchise  values  bv 
taking  the  lines  separately  and  all  together,  by  using  the  car- 
mile  basis  of  operation,  allowances  for  growth  and  for  com¬ 
petition  ;  I  have  had  the  receivers’  actual  results ;  and  I  find 
the  franchise  value  of  the  property  to  be  $3,615,843.89 ;  mak¬ 
ing  the  total  value  of  the  property  on  those  two  items  $21,- 
127,149.53. 

It  was  contended  on  the  part  of  the  city  that  some,  if 
not  all,  of  the  outside  franchises  had  no  franchise  value  at  all. 


17 


but  imposed  a  burden,  and,  on  the  other  side,  that  they  had  a 
real  value  and  that  the  company  was  entitled  to  compensation 
for  them.  Now,  dealing  with  this  question  broadly,  and,  as 
it  seems  to  me,  justly,  I  think  that,  excepting  the  Euclid  Creek 
franchise,  which  has  no  complications,  the  franchise  value  of 
suburban  grants,  whatever  it  may  amount  to,  ought  to  be 
offset  against  the  burdens  of  suburban  contracts,  to  whatever 
extent  they  may  exist,  for  the  reason  that  all  the  territory 
covered  by  the  Cleveland  Electric  lines  is  one  homogenous 
community,  destined  soon  to  become  one  municipality  in  which 
a  zone  system  will  be  intolerable.  And  I  do  it  because  the 
evidence  bearing  upon  the  question  of  burdens  and  the  evi¬ 
dence  bearing  upon  the  question  of  values  is  wholly  without 
persuasiveness  to  me.  There  are  cases  where  an  assumption 
can  be  made  that  will  lead  you  to  a  result  that  is  despairingly 
misleading.  All  you  have  to  do  is  to  assume  something  and 
then  you  can  prove  anything  that  you  want  to  prove.  But 
who  can  say  what  will  happen  in  all  of  these  outlying  com¬ 
munities,  and  who  can  say  what  are  the  moral  rights  of  the 
whole  situation  growing  out  of  the  fact  that  we  have  one 
community  here?  Who  can  say  how  much  they  may  grow, 
or  what  arrangements  can  be  made  between  the  outlying 
grants  and  the  inlying  grants?  Whenever  we  undertake  to 
figure  out  a  specific  and  concrete  result  in  figures,  we  are 
involved  in  a  quagmire  of  speculation  and  uncertainty  that  is 
obnoxious  to  every  mind  that  seeks  to  base  a  conclusion  upon 
some  facts  that  have  a  certain  tendency  and  lead  to  a  certain 
result. 


In  the  Goff-Johnson  inquiry,  Mr.  Johnson  said  that  he 
had  perfect  faith  that  the  outside  franchises  could  be  operated 
so  that  they  would  not  lose.  I  think  that  that  is  so.  I  would 
rather  take  his  general  judgment  of  that  in  that  way  and  under 
those  circumstances  than  a  judgment  that  is  arrived  at  by  a 
maze  of  figures  which  somewhere  in  them  may  have  secreted 
a  half  dozen  mere  hypotheses  resting  on  the  imagination  of 
the  person  who  makes  them. 


18 


Now,  as  I  have  already  indicated  before  in  this  hearing, 
in  my  opinion  the  initial  rate  of  fare  should  be  three  cents 
and  one  cent  for  a  transfer,  without  rebate,  and  the  maximum 
rate  should  be  four  cents  for  a  single  fare,  seven  tickets  for 
twenty-five  cents,  and  one  cent  for  a  transfer,  without  rebate. 

I  approve  the  suggestion,  and,  indeed,  I  can  see  no  other 
solution  of  it,  if  consents  of  abutting  property  owners  are 
secured,  that  the  company  be  required  to  extend  its  line  on 
Lorain  Avenue  to  the  city  limits  if  no  fair  arrangement  can 
be  made  with  the  interurban  company  for  the  use  of  its  tracks. 

Now  I  have  come  to  a  question  that  has  given  me 
more  difficulty.  I  do  not  mean  that  I  have  expended  anything 
like  the  time  on  it  that  I  have  on  these  other  questions  that 
involve  so  much  minute  examination,  but  intellectually  it  has 
been  a  more  difficult  question  to  answer.  But  I  have  arrived 
at  a  conclusion  that  now  is  entirely  satisfactory  to  me.  That 
is  the  question  of  whether  or  not  we  can  discover  a  moral 
obligation,  which  the  community  ought  to  recognize  and  carry 
out,  to  make  good  the  guarantee  which  was  made  by  The 
Municipal  Traction  Company  to  the  purchasers  of  Forest  City 
Railway  Company  stock  and,  later,  Cleveland  Railway  Com¬ 
pany  stock. 

The  first  thing  that  is  necessary,  before  approaching  the  . 
consideration  of  that  question,  is  to  detach  one’s  self  from  the 
personal  equation  involved  in  that  particular  inquiry.  A  great 
deal  has  been  said  in  the  community,  one  way  and  another, 
as  to  the  propriety  of  this  guarantee,  and  of  the  free  stock 
exchange  maintained  by  the  Municipal  Traction  Company; 
and  some  criticisms  that  have  been  made  of  that  are  not  with¬ 
out  my  approval.  I  cannot  think  that  it  was  quite  a  business¬ 
like  proposition  to  make,  under  all  the  surrounding  circum¬ 
stances,  because  the  situation  was  speculative  and  not  secure. 
But,  after  all,  what  was  the  situation  when  we  get  rid  of  the 
personal  equation?  The  Forest  City  Railway  Company  had 
certain  franchises  and  property,  and  it  made  a  lease  to  The 
Municipal  Traction  Company;  and  in  April,  1908,  it  acquired 


10 


a  franchise  for  the  Woodland  Avenue  and  West  Side  lines, 
which  gave  to  the  Forest  City  Company  something  which  it 
never  had  before — a  valuable  franchise,  having  a  real  fran¬ 
chise  value  at  a  3-cent  rate  of  fare.  That  is  to  say,  the  line 
is  so  relatively  short,  and  runs  through  so  congested  a  terri¬ 
tory  that  it  is  a  profitable  line  at  3-cent  fare.  It  has  had  a 
considerable  franchise-earning  value  during  the  operation  by 
the  receivers  at  three  cents  and  two  cents  for  a  transfer ; 
that  is,  it  has  earned  more  than  the  cost  of  operation  and 
six  per  cent  during  the  receivership,  at  the  low  rate  of  fare. 

Now,  the  franchise  value  arising  out  of  that  operation 
was  partly  assignable  to  the  Cleveland  Railway  Company ; 
because  the  Forest  City  Company,  which  would  otherwise  have 
had  the  franchise,  would  have  had  to  make  some  arrange¬ 
ments  to  get  the  tracks,  and  power,  and  all  of  that ;  so  that, 
while  we  can  only  speculate  as  to  any  division  of  it,  and  I 
do  not  intend  to  make  any  division  of  it,  I  will  only  observe 
generally  that  there  was  a  real  franchise  earning,  and  is  to¬ 
day,  on  the  Woodland  Avenue  and  AYest  Side  lines.  Con¬ 
sidering  it  in  the  light  that  we  have,  when  we  are,  on  the  first 
day  of  January,  1908,  contemplating  the  situation  and  looking 
forward,  we  discover  an  earning  power  over  and  above  cost 
of  operation  and  six  per  cent  interest,  which,  in  some  way, 
would,  with  the  conditions  that  we  now  have,  be  divided  be¬ 
tween  the  Cleveland  Railway  Company  and  the  Forest  City 
Railway  Company.  I  am  only  saying  that  the  Forest  City 
Company  had  that  valuable  thing  when  this  lease  was  made 
to  the  Municipal  Traction  Company. 

Now,  I  can  touch,  without  offence  to  myself — or  anybody 
else  for  that  matter.  I  suppose — on  the  so-called  gentleman's 
agreement.  There  is  no  doubt  about  an  understanding  be¬ 
tween  the  Forest  City  and  the  Municipal  people,  on  the  one 
hand,  and  the  Cleveland  Electric  people  on  the  other  hand, 
that  if  the  negotiations  which  they  were  conducting  during 
the  month  of  April  and  sought  to  complete  on  the  27th  of 
April  should,  for  any  cause,  fail  to  become  fully  effective, 

20 


the  parties  should  be  restored  to  the  condition  in  which  they 
were  before  the  negotiations  had  been  entered  upon.  Now, 
when  the  time  came  when  there  was  any  desire  to  restore  the 
conditions,  the  great  body  of  the  Forest  City  stockholders, 
all  but  a  handful,  had  permitted  themselves  to  be  merged 
into  the  stockholding  element  of  the  Cleveland  Railway  Com¬ 
pany.  They  were  inseparably  associated,  and  you  could  no 
more  separate  those  stockholders  as  a  matter  of  law  than  you 
could  divide  a  human  being  by  cutting  down  through  the 
middle  from  head  to  foot  and  saying  that  you  had  two  men 
or  two  halves  of  a  man  left.  They  were  integrally  associated, 
and  you  could  not  separate  them.  Besides  that,  other  com¬ 
plications  arose — not  as  manifestly  conclusive  as  that,  but 
real ;  for  instance,  that  the  property  of  the  Forest  City  Rail¬ 
way  Company  had  come  under  the  mortgages  of  the  Cleveland 
Electric  Railway  Company,  under  well  understood  so-called 
after-acquired-property  clauses,  whose  efficiency  to  accom¬ 
plish  the  purpose  described  has  been  thoroughly  established, 
although  there  might  be  some  question  arising  in  this  par¬ 
ticular  case.  But  the  arrangement  between  the  parties,  to  the 
carrying  out  of  which  there  were  insuperable  legal  obstruc¬ 
tions,  did  exist,  and  the  Cleveland  Electric  Railway  Company 
could  not  turn  back  that  property,  because  of  this  merging  of 
the  stockholders  of  the  two  companies  together  into  one. 

Now,  we  are  in  this  position,  where  we  contemplate  that 
fact  and  recognize  the  legal  obstructions  to  carrying  out  the 
arrangements  under  the  conditions  which  then  existed,  and 
we  have  this  fact,  that  the  property  rights  which  the  Forest 
City  Company  owned  at  the  time  the  lease  was  made  were, 
as  compared  with  what  it  had  before,  large  and  real,  and  pro¬ 
ductive  of  an  income  which  would  easily  have  protected  the 
Municipal  Traction  Company  in  its  guarantee  that  it  would 
redeem  the  stock,  or  buy  the  stock,  and  pay  six  per  cent  on 
the  amount  of  it  less  the  dividends  that  had  been  declared. 
Now,  there  is  no  escaping  that  situation,  or  that  fact.  What¬ 
ever  might  have  been  the  difficulties  during  the  greater  part 
of  the  period  when  those  guarantees  were  issued,  however  tin 

21 


facts  may  have  justified  the  hope  that  six  per  cent  could 
be  earned  on  the  stock  of  the  Forest  City  Railway  Company 
prior  to  that  time,  the  reception  of  the  Woodland  Avenue  and 
West  Side  grant  in  April,  before  this  lease  was  made,  put 
beyond  any  controversy,  we  see  now,  the  fact  that  the  Muni¬ 
cipal  Traction  Company  could  easily,  having  the  lease  of  the 
Woodland  Avenue  and  West  Side  lines,  in  whatever  form  it 
might  have  come,  have  fulfilled  the  guarantee  which  it  made 
to  these  stockholders. 

Now,  the  vast  majority  of  all  these  stockholders  were 
wholly  innocent  of  any  sort  of  conduct  which  might  subject 
them  to  criticism,  whatever  might  be  said  of  anybody  else  in 
that  relation.  The  vast  majority  of  them,  as  I  say,  were 
just  ordinary,  everyday  people,  who  invested  their  money  on 
the  faith  of  the  guarantee. 

Now,  we  could  not  put  our  hands  into  somebody  else’s 
pocket,  and  pay  for  an  unwarranted  or  incautious  guarantee. 
But  the  community  has  profited,  the  community  has  received 
the  benefit,  and  the  money  is  in  the  property,  or  in  the  re¬ 
ceiver’s  hands,  which  is  the  same  thing.  The  community  has 
had  the  benefit  that  justified  the  laying  upon  it  of  such  burden 
as  rightfully  should  be  laid  on  account  of  this  guarantee. 

Now,  that  is  the  conclusion  that  I  have  come  to,  after  a 
good  deal  of  tribulation  on  the  subject,  and  it  has  clarified 
itself  to  me  the  more  the  longer  I  have  thought  of  it,  and  it 
approves  itself  to  me  in  spite  of  all  the  disturbing  circum¬ 
stances  that  affect  the  judgment  of  men  when  they  pass  upon 
a  question  of  this  sort  that  has  permeated  the  whole  com¬ 
munity  and  affected  every  man  and  woman  in  it,  almost,  with 
varying  result  of  opinion.  Notwithstanding  all  of  that,  I  have 
so  separated  myself  from  any  position  where  I  might  have 
a  prejudice  as  to  have  the  profound  conviction  on  the  subject 
that  some  provision  ought  to  be  made  for  taking  care  of  that 
guarantee,  and  for  the  amount  of  it  passing  into  the  capital 
value  of  the  company. 

Now,  gentlemen,  to  get  the  substantial  result  of  all  that 
I  have  said,  it  is  this:  That  the  deduction  which  I  have 


22 


made  in  the  value  of  the  Cleveland  Electric  property,  amount¬ 
ing  to  something  over  a  million  dollars,  is  practically  offset 
by  the  dividends  which  otherwise  would  have  been  paid  to  it 
for  the  first  quarter  of  1908  and  the  five  quarters  since  Octo¬ 
ber  1,  1908,  so  that  they  will  have  contributed  by  so  much — 
something  over  a  million  dollars  in  the  way  of  dividends  that 
the  property  has  earned — to  reimburse  the  capital  account 
covered  by  their  stock  as  of  the  first  day  of  January,  1910. 
So  that,  assuming,  as  I  do  assume  and  believe,  that  the  stock, 
on  the  first  day  of  January,  intrinsically  will  be  worth  par, 
the  Cleveland  Railway  Company  stock,  not  having  its  origin 
in  the  Municipal  Traction  Company  guarantee,  will  be  worth 
par  and  1^4  per  cent,  being  a  sum  which  would  give  them  1J4 
per  cent  to  equalize  them  with  the  stockholders  who  came 
under  the  guarantee  and  who  were  paid  \]/2  per  cent  on  the 
first  day  of  October,  1908.  These  allowances,  of  course,  do 
not  attach  as  dividends,  and  are  not  to  be  treated  as  dividends, 
but  only  as  a  sum  to  be  paid  to  the  several  persons  who  are 
entitled  to  it.  And  the  practical  manner  in  which  I  have  dis¬ 
posed  of  the  guarantee  matter  is  this :  This  guarantee  was 
made  to  individuals  who  purchased  the  stock,  and  I  doubt  its 
application  to  successors  in  title  to  the  persons  who  bought  it. 
But  that  is  not  a  very  large  question,  because,  I  am  told,  less 
than  ten  per  cent  of  the  stock  has  changed  hands.  In  view 
of  the  fact  that  the  settlement  recommended  by  me,  should  it 
become  operative,  will  make  the  stock,  in  my  opinion,  intrinsi¬ 
cally  worth  par,  I  recommend  that  the  obligation  created  by 
the  guarantee  be  adjusted  by  the  payment,  either  through  The 
Municipal  Traction  Company  or  in  some  other  convenient  and 
suitable  way,  to  the  persons  who  originally  purchased  the 
same  on  the  faith  of  the  guarantee,  of  an  amount  equal  to  7^/2 
per  cent  of  the  par  value  of  such  guaranteed  stock  so  owned, 
and  that  the  same  principle  be  applied  to  the  fractional  shares, 
— seven  and  one-half  per  cent  interest  accruing  from  October 
1.  1908,  when  the  last  payment  was  made  to  those  stockholders, 
up  to  the  first  day  of  January^  1910. 

Now,  a  contention  was  made  as  to  the  rights  of  parties 


23 


who  since  the  receivership  have  sold  their  stock  at  a  loss.  I 
am  not  prepared  to  say  what  ought  to  be  done  about  those. 
The  amount  involved  is  not  very  large,  and  that  is  not  an 
important  matter  in  connection  with  the  ordinance,  but  I  am 
willing  to  take  up  that  question  and  to  consider  to  what  ex¬ 
tent,  if  any,  these  former  owners  of  such  stock  may  be  en¬ 
titled  to  any  reimbursement.  I  would  not  want  to  make  a 
decision,  anyhow,  upon  that  at  this  moment  without  an  exam¬ 
ination  of  the  several  claims,  because  it  is  a  moral  obligation, 
and  the  moral  obligation  as  to  any  reimbursement  for  loss 
incurred  in  selling  might  not  exist  in  some  cases. 

As  to  the  six  per  cent,  of  course  it  applies  to  all  those 
who  still  hold  the  stock  and  purchased  it  under  the  guarantee. 

I  think  I  have  omitted  nothing,  have  I,  gentlemen,  that 
has  been  submitted  to  me?  I  have  a  formal  letter  here  to  the 
Cleveland  Railway  Company  and  to  the  City,  which  I  will 
formally  present. 

MR.  BAKER: 

The  question  has  just  been  asked  me  by  Mr.  Johnson,  and 
I  ask  you,  so  that  we  can  understand  it — Is  the  effect  of  your 
finding  to  require  the  setting  aside  of  a  sum  of  seven  and 
one-half  per  cent  for  the  benefit  of  this  class  of  Forest  City 
stockholders,  and,  in  addition  to  that,  to  allow  for  interest? 

JUDGE  TAYLER : 

No.  I  say  per  cent  because — if  it  be  true  that  20,000 

shares  or  more  of  the  guaranteed  stock  is  still  in  the  hands 
of  the  persons  to  whom  it  was  originally  issued — there  is  a 
very  simple  way  of  settling  with  them.  You  pay  them  six 
per  cent,  of  7^4  per  cent,  which  would  cover  the  interest  from 
the  first  day  of  October,  1908. 

MR.  JOHNSON: 

The  others  do  not  get  the  interest? 

JUDGE  TAYLER : 

No. 

24 


MR.  JOHNSON: 

Does  the  balance  of  the  Cleveland  Railway  Company  get 
interest? 

JUDGE  TAYLER : 

The  balance  of  the  Cleveland  Railway  stock  get  \l/2  per 
cent  for  the  quarter  between  the  first  of  July  and  the  first  of 
October,  1908. 

MR.  JOHNSON: 

They  do  not  get  anything  else  after  that? 

JUDGE  TAYLER : 

No;  not  until  after  January  1,  1910.  That  is  to  say,  that, 
of  course,  is  a  mere  artificial  balance  which  I  have  struck  ; 
the  reduction  in  the  Cleveland  Railway  property,  which  I 
find  is  approximately  the  same  but  is  in  amount  a  little  more 
than  the  amount  of  six  per  cent  which  they  are  entitled  to 
since  the  first  day  of  January,  1908,  omitting,  of  course,  the 
second  quarter  of  1908,  when  they  got  a  dividend,  and  the 
third  quarter,  which  is  necessary  to  equalize  them  with  the 
Forest  City  as  to  that  quarter.  That  is  to  say,  the  $193,000. 
which  covers  1J4  per  cent  on  the  Cleveland  Electric  part  of 
the  Cleveland  Railway  stock,  they  are  entitled  to,  of  course. 
The  balance  of  the  amount  which  they  do  not  get  exceeds 
slightly  the  total  amount  of  the  reduction  which  I  make  in 
their  value.  So  that,  taking  an  ideal  case,  a  stockholder  who 
has  a  share  of  guaranteed  stock  has  par  and  is  entitled  to  7l/2 
per  cent ;  and  the  others  are  entitled  to  par  and  1  y2  per  cent. 

MR.  JOHNSON: 

No  dividends  are  payable  until  after  January  1st,  on  anv? 

JUDGE  TAYLER : 

No  dividends  are  payable  until  after  January  1st,  and. 
of  course — . 

MR.  JOHNSON : 

Except  October  last. 

JUDGE  TAYLER : 

I  do  not  call  that  a  dividend,  Mr.  Johnson  ;  I  do  not  call 

25 


any  of  it  a  dividend.  It  is  the  payment  of  a  gross  sum  of  7^2 
per  cent  to  the  guaranteed  stockholders,  and  a  payment  of  \y2 
per  cent  to  the  other  stockholders,  as  intending  to  cover  that 
quarter  when  the  guaranteed  stockholders  received  their  guar- 
anteed  amount.  It  was  not  really  paid  as  a  dividend,  but  was 
accompanied  with  an  assignment  of  any  dividend  that  might 
be  declared.  There  will  be  no  dividend  declared  before  the 
first  day  of  April,  1910. 

MR.  JOHNSON: 

Then  the  first  dividend  of  $193,000  is  to  go  to  the  Cleve¬ 
land  Electric  stockholders  as  of  record  April  1,  1908,  no  sub¬ 
sequent  stockholders  to  participate? 

JUDGE  TAYLER : 

I  don’t  know.  I  suppose  that  is  where  it  ought  to  go. 

MR.  JOHNSON: 

Of  course,  there  is  where  it  has  to  go,  to  the  Cleveland 
Electric  stockholders  of  April,  1908.  They  are  entitled  to 
that  $193,000. 

JUDGE  TAYLER: 

It  would  rather  be  October,  1908. 

MR.  JOHNSON: 

There  are  two  dividends? 

JUDGE  TAYLER : 

They  were  all  paid  the  dividend  for  the  second  quarter. 

MR.  JOHNSON: 

They  were  not  paid  the  dividend  for  the  first  quarter. 

JUDGE  TAYLER: 

I  understand  that.  That  is  out  of  the  way.  The  third 
quarter  is  the  quarter  that  was  not  paid. 

MR.  CRAWFORD : 

The  first  and  third. 

JUDGE  TAYLER: 

The  first  and  third. 


26 


MR.  JOHNSON: 

I  only  want  to  clear  it  up.  We  agreed  in  a  paper  which 
we  submitted  to  you  that  the  original  stockholders  of  the 
Cleveland  Electric  were  to  receive  that.  Do  I  understand 
that  is  to  be  cut  off? 

JUDGE  TAYLER : 

If  there  is  any  understanding,  I  do  not  care  anything 
about  it.  I  am  only  dealing  with  figures  and  the  general 
disposition  of  it,  and  I  might  just  as  well  have  taken  any 
one  quarter  as  another.  They  are  all  the  same  except  the 
last  five,  upon  which  I  have  computed  the  interest — or 
dividend — right  upon  one  million  dollars  loss.  I  did  not  com¬ 
pute  the  last  five  quarters  on  the  $12,870,000,  but  on  a  little 
more  than  one  million  dollars  less,  because  the  value  is  re¬ 
duced  as  of  that  date. 

MR.  SOUIRE: 

I  think  Mr.  Johnson  is  right.  You  take  five  quarters  to 
equalize.  That  would  leave  the  Cleveland  Railway  stock¬ 
holders  entitled  to  a  sum  equal  to  a  dividend  on  the  first  and 
third  quarter. 

JUDGE  TAYLER: 

No. 

MR.  JOHNSON: 

I  think  we  ought  to  clear  it  up  right  now,  because  I  don’t 
want  any  dispute  about  that.  We  submitted  to  you  a  number 
of  agreements  as  to  bookkeeping  entries ;  among  them  was 
this  one.  Now,  as  I  understand  it,  you  make  no  objection  to 
any  of  those,  and  they  are  to  be  carried  out  between  the 
parties,  as  I  understand. 

JUDGE  TAYLER: 

Yes. 

MR.  JOHNSON: 

Now,  the  Cleveland  Electric  Railway  Company’s  property 
was  valued  January  1,  1908.  They  were  to  have  a  dividend 

27 


allowance,  which  was,  for  convenience,  put  into  a  guarantee 
fund  of  $193,000,  or  \y2  per  cent.  If  any  less  sum  was  there, 
the  remaining  sum  was  to  be  divided  between  the  original 
Cleveland  Electric  stockholders.  In  our  agreement,  there  was 
a  difference  of  some  fourteen  or  fifteen  thousand  dollars,  but, 
rather  than  make  a  fractional  dividend,  we  agreed  that  the 
stockholders  of  record  April  1,  1908,  were  to  have  this  divi¬ 
dend  of  $193,000,  as  being  the  interest  that  they  would  receive 
on  their  property  for  the  first  cjuarter.  They  received  the 
next  cjuarter.  W  e  are  providing  for  the  payment  of  the  third 
cjuarter,  and  I  do  not  understand  you  to  make  any  ruling 
against  that. 

JUDGE  TAYLER: 

The  point  is  right  here :  That  I  find  a  value  of  this  prop¬ 
erty  of  something  over  one  million  dollars  less  than  the  Goff- 
johnson  appraisal,  and  that  is  approximately  nine  per  cent,  the 
dividends  for  six  quarters,  and  I  do  not  want  to  change  the 
capital  value  as  of  January  1,  1910,  because  that  would  pro¬ 
duce  great  inconvenience. 


MR.  SOUIRE: 

That  is  six  quarters,  and  they  are  only  entitled  to  one. 

JUDGE  TAYLER : 

Yes,  they  are  only  entitled  to  one.  I  do'  not  care  how 
that  comes  about,  or  how  you  arrange  that. 

MR.  JOHNSON: 

Of  course,  if  it  is  one,  it  must  be  October.  January  to 
January  is  five,  and  this  April  would  make  six. 

JUDGE  TAYLER: 

Because  of  the  suggestion  made  here,  in  which,  of 
course,  I  had  no  special  interest,  that  we  make  some  particular 
provisions  to  give  to  the  Cleveland-Electric  stockholders  of 
the  Cleveland  Railway  Company  the  same  return  for  the 
quarter  ending  October  1,  1908,  as  the  guaranteed  stockhold¬ 
ers  had  received  for  the  same  cjuarter,  I  arbitrarily  selected 

28 


that  as  the  quarter,  since  that  was  about  the  amount  that 
would  be  left  after  disposing  of  the  deficiency  in  the  value, 
and  I  took  it  for  that  quarter. 

MR.  JOHNSON: 

Then  it  does  not  supersede  our  agreement,  and  I  wanted 
to  get  it  clear,  but  the  payment  in  lieu  of  dividends  on  Octo¬ 
ber  1  is  to  go  to  all  those  who  did  not  receive  it.  Some 
checks  were  held  up. 

JUDGE  TAYLER : 

Yes.  Of  course,  that  is  a  practical  detail.  It  goes  to  all 
of  those  who  did  not  receive  it,  of  course. 

MR.  JOHNSON: 

The  balance  of  our  agreement  stands? 

JUDGE  TAYUER : 

Yes,  that  is  right.  Is  there  any  further  inquiry? 

MR.  JOHNSON: 

When  are  we  going  to  take  up  the  question  of  those  who 
sold  the  stock?  You  sav  there  is  one  remaining  question  to 
be  disposed  of. 

JUDGE  TAYUER: 

That  hasn’t  anything  to  do  with  the  ordinance.  The 
ordinance  will  provide  that  such  indebtedness  as  I  find  equit¬ 
able  growing  out  of  the  guarantee  shall  pass  into  the  capital 
value.  I  have  disposed  of  almost  the  entire  sum,  and  there 
cannot  be  very  much  left. 

MR.  JOHNSON: 

Ts  that  provided  for  in  the  ordinance  now? 

JUDGE  TAYUER : 

Not  now,  but  it  is  to  be.  Mr.  Baker,  T  understand,  is 
to  prepare  that.  The  frame  of  the  ordinance,  to  take  care  of 
this  finding  on  the  moral  obligation,  should  be  that  the  amount 
that  is  found  as  growing  out  of  that  should  be — 


29 


MR.  JOHNSON: 

I  just  wanted  to  make  one  suggestion.  I  don’t  under¬ 
stand  there  is  any  contest  on  that. 

JUDGE  TAYLER : 

I  don’t  know.  You  may  be  able  to  agree  on  the  disposi¬ 
tion  of  that.  Now,  there  are  some  separate  items  in  a  paper 
Mr.  Baker  left  with  me  yesterday  or  the  day  before.  It  seems 
there  are  a  number  of  claims.  They  will  have  to  stand,  like 
all  other  claims  that  are  made  against  the  property  which  are 
to  be  found  as  debts,  and  I  will  dispose  of  them  as  soon  as 
I  can. 

MR.  JOHNSON: 

That  was  included  in  the  balance  of  the  agreement. 

JUDGE  TAYLER: 

You  may  be  able  to  agree  between  you  as  to  what  that 
ought  to  be. 

MR.  JOHNSON: 

We  have  agreed. 

JUDGE  TAYLER: 

You  make  it  up  in  a  statement. 

MR.  JOHNSON : 

The  statements  furnished  to  you  have  been  agreed  to  by 
both  sides. 

JUDGE  TAYLER: 

I  do  not  want  to  add  those  figures  up. 

MR.  JOHNSON : 

We  don’t  want  to  ask  you  to  add  them  up.  We  will 
furnish  you  with  the  addition.  I  thought  we  might  agree 
about  this,  if  Mr.  Crawford  has  no  objection. 


30 


Correspondence  between  Judge  Tayler  and  the  Cleveland 
Railway  Company  in  regard  to  distribution  of 
valuation  among  the  several  schedules 
of  property. 


MEMORANDUM. 

On  or  about  April  9th,  1910,  the  Secretary  of  The  Cleve¬ 
land  Railway  Company  submitted  to  Judge  Tayler  the  fol- 
lowing  table,  and  pointed  out  to  him  a  difference  of  $1,000.02 
between  the  total  value  of  the  physical  property  of  The  Cleve¬ 
land  Electric  Railway  Company  as  stated  in  the  Judge’s  etter 
of  December  17th,  1909,  to  the  City  Council  and  The  Cleve¬ 
land  Railway  Company,  viz.:  $17,51 1,305.64,  and  the  value 
as  announced  by  him  in  his  oral  decision,  viz.:  $1 7,510,305.62, 
the  latter  amount  being  the  same  as  shown  in  the  table  re¬ 
ferred  to,  which  was  made  up  by  adding  to  schedule  A  of  the 
Goff-Johnson  valuation  10  per  cent,  to  schedule  B  3  per  cent, 
and  to  the  other  schedules  (except  J  and  K)  5  per  cent,  the 
percentages  allowed  by  Judge  Tayler  as  specific  overhead 
charges : 


31 


THE  CLEVELAND  ELECTRIC  RAILWAY  COMPANY  F.  C.  RY  CO. 


i n 

V) 

c 

o 

-o 

O 

‘w 

c 

o 

-2f 

*s 

m 

>N 

LU 

ac 

co 

H- 

rs 

> 

# 

o 

C. 

o 

• 

O 

=5 

"5 

■+- 

o 

LU 

—v 

h- 

M- 

<M 

vO 

00 

M* 

M" 

'r-H 

00 

r— l 

On 

tF 

,— i 

▼  ■  'i 

CM 

o 

r— l 

ro 

ts 

O 

rH 

vC 

VO 

Tf 

ro 

VO 

rF 

VO 

CM 

ro 

CM 

VO 

r  ■■* 

VC 

00 

lO 

lO 

^F 

O 

id 

ts 

On 

CM 

> 

4—4 

rd 

o 

1—4 

00 

On 

o 

id 

id 

rd 

p 

ON 

o 

d 

LO 

VO 

ts 

On 

ro 

ts 

vC 

ro 

ts 

VO 

LO 

ts 

ro 

Q 

M" 

tF 

tF 

VO 

O 

vo 

rp 

ro 

ts 

O 

oc 

oo 

vC 

On 

VC 

CM 

CM 

VC 

O 

OC 

ts 

ts 

iO 

ro 

O 

CM 

ts' 

On 

cm' 

CM 

8 

oo' 

i— H 

8 

rd' 

Cn 

58 

ts 

vC 

o 

t-H 

id 

Q 

vd 

id 

r— i 

ro 

CM 

ro 

rd 

ro 

VC 

oo 

CM 

CM 

O 

ro 

tF 

ro 

tF 

ts 

VC 

ro 

vp 

O 

O 

On 

^F 

—T 

rd 

r— <* 

r  ■< 

r— 1 

vc 

cm' 

oT 

ro' 

cm' 

CVJ 

cm' 

r— 4 

CM 

04 

CM 

yy 

yy 

yy 

yy 

C/5 


“C 

3 


CM  tS 

vO  ^ 

'  CO 


S3 


M- 

vC 

vC 


C/5 

C 

o  c 

2  I 

C/5 


LU 

_J 

2 

a 

LU 

x 

o 

in 


__  M"  M"  _ 
00  ON  ON  CO 
O^K 


2  =  vo  ts 
£  ~  iO  CM 
H  #  LOt\ 

«  -|  o'  rF  VO  'J~>  rd'  oc 

°*  ®  ^  og  uo  ^  r^T-j- 

Tf  T— t 


f  ‘  ? 


s  ^  ^ 

cK  oq  <p  CM 
CM  d  VO  d  ON 

CM  K  Q\  ^ 

O  Cp  00  1  cp 

VO  O  ON  vo"  ^ 

vO  vO  ro  ^ 


yy 


8  0  VO  vo  ro  ts  Is  0\  ts  uo 
(CvO^'t^NfOfOO 

O’ — 1  is  vd  id  d  d  vd  d  d 
roO^O\rClfl^rtir'tNO 
\ONih  t— i  co  *p  00  ro  O  vo 

'  vo  oo"  O  ts' 


O  CM  p 
00KO 
— ts 

d  — '  CM* 

yy 


-  -0  Q 
ChOOioOM 


00  O 


ts  CM 
.  _  CM  vO 
<0  <0  Tj-  -—i 

cm' 


80  vO  O  VO  00  VO  Tf  VO. 
O’ — 1  In.  ro  00  ^  *0  t— < 

S’  O  00  ro  ON  o'  ON  ro 
ro  CM  (M  rF  ON  Is  M-  ON 
w  OK  ts  y~l  ro  ts  00  p 

o’  — -  d  O  cvj  o'  i-  C  't 

X  lO  ro  VO  •+  vo  r— .  — i 

ro  1  «— • 


On 

CM 

OC 

ro 

Is 

ts' 


o.  yy 


O  O  ^  ,r>  l°  'O  vo  VO  vo 


VO 


8rH  Vft 

CM  ro  ro 
oqr<  vc  -h 

ro"  _T  CM  d 
<& 


o 

rt 

•— 

H 


c 

<u 

6 

<v 

> 

cS 

Cm 


q  .G, 
C  3 
•JG  cj 


ro  ’t  K  NO 

ON  On  ro  is. 

d  CM  d  id 
Cn  vO  Is  vC 
ON  oc  ©  ts 

vC  Cn  is  d 

OO  CM  VO 
CM  CM  tJ-  t-/ 

cm' 


CO 

-u-> 

03 

in 

o 

o 

•4— » 

ex 

o 

JG 

c/3  . 


rt 


I  1 


aJ  . 

CJ  d 


OQ  cj  O 


c/3  03 

bjo  a3 

G  03 
•  *— <  r* 

•a  t: 

O  <l» 

G  > 

PQ  O 

i  i 

Ll)  Cl. 


C/3 

03 

C/3 

G 

O 

JC 

i 

u 

<v 

> 


in 

a 

'\Z 

03 

-/-> 

■4—1 1 

03 

jG 

<L> 

bo 

Oj 


<U  o 

C^ 


w 

<L> 

i-c 

O 

+j 

in 


i 


m 


G 

<v 

E 

ex 

•  * 

G 

cr 

W 

cJ 

C/3 

•  i—i 

L— 4 


h— ’ 
I 


ro  ts  O 

CM  ts  O 

8  : 

id  d  d 

O  00 

g  • 

tp  T~~l  ts 

vp  I 

M*  1  On' 

id  • 

fO  K  Qn 

O  • 

vo  1—4 

oo  • 

i — r 

yy 

00  M" 
CM  ro 

id  O 
vC  -M" 

VO  I  s 

id  d 

IS  ro 
4-4  ro 

VO  CM 

r— < 


oj 

-*-> 

•O 


m 

CJ 

be 

i— 

03 

c— 

CJ 


03 

<u 


<D 


CM  CN 

vp  oq 
id  ro 
O  'Tt- 
ro  00 

o’  vrT 

vo  VC 
ts'  ro 

55- 


03 


C/3 

0/ 

C/3 


o3 

4— I 

O  'X 
H  <o 


03 

U 


LO 

On 

■^F 


vC 

CVJ 


CM 


Cv]  M- 

VC  * 

iO  ro 

X  • 

o  d 

00  - 

8  i 

tF  CM 

VC  . 

o'  id 

id  • 

vo  CM 

ts  • 

00  vp 

M" 

T~‘1 

CM 

yy 

yy 

vC  O 

vC  M- 

ts  O 

ts  <Kj 

d  d 

M"  vo 

oo  ro 

r-H  X 

O  vp 

CO- 

vd  O 

d  tF 

CVJ  O 

ro  vo 

rp  ts 

o  O^ 

d 

id  X 

r— » 

r-  H 

yy 

yy 

VC 

o' 

cc 

o 

ro' 

yr 


CS 

4-> 

c 

H 


ro 

VO 

On 

M" 

ts' 

CM 


Cv) 


03  r- 
<U  ~ 

cn  C 

v ^ 
o3 


n  !- 


m 

~u  c 

03 

or1  vo 
C'<o 
rrt  ts 

H  cm 

03 

03  bX) 


'o3  U 
G  O 

- - -  -4—* 

03  C33 

>  _ 

k>  oj 
*  ‘ 

CJ  .G 

C  G- 

-*-*  o3 
W3  .j 

S  2 

=31 

3-  = 

CT 

'  03  O 


o  i 

G.0 


03  bx  Fr-  o; 
be  03  »t3 

C  exO^  2  .G 


g: 


§< 
■Z  OO 
cj  ro 

03  CM 

CT;  VC 


03  03 
03  CJ 

C/3  G 
aj 


to 

vo  , 

vC  ° 

M*  o 
—  vc 

y~r ' — 1 


cS 

-4-J 

c 

H 


32 


After  an  examination  of  this  table  and  of  his  notes  and 
memoranda,  Judge  Tayler  wrote: 


April  11,  1910. 

H.  J.  Davies,  Esq., 

Cleveland,  Ohio. 

Dear  Sir: — The  first  footing  which  I  made  of  the  various 
items  of  physical  value  of  The  Cleveland  Electric  property 
was  as  it  appears  in  your  tabulation,  $15,175,565.28,  to  which 
was  added  the  general  overhead  charge  and  another  item  un¬ 
important  in  this  connection,  making  a  grand  total  of  $17,- 
510,305.62,  which  is  the  same  as  yours.  On  my  lead-pencil 
memorandum  which  I  used  in  delivering  my  opinion  and  in 
preparing  the  formal  communication  to  the  council,  that  total 
is  changed  by  putting  “1”  over  the  “0”  in  front  of  the  “3” 
and  changing  the  “2”  in  “62”  to  “4”.  I  am  unable  to  find  an 
explanation  for  this  change.  Doubtless  there  is  one,  but  I 
do  not  discover  it. 

However  that  may  be,  and  that  is  why  it  was  relatively 
unimportant,  my  total  value  was  arbitrarily  forced  to  balance 
so  as  to  make  the  diminution  in  the  value  of  the  Cleveland 
Electric  property  equal  the  amount  of  dividends  which  the 
Cleveland  Electric  stockholders  were  entitled  to  during  six 
quarters.  Doubtless  it  is  in  that  way  that  you  add,  as  you  do, 
on  the  last  column,  $550.47,  in  order  to  equalize  the  stock 
value,  that  is,  to  make  the  capital  stock  $14,675,600.  It  cer-. 
tainly  makes  no  practical  difference  in  the  result. 

If  you  have  no  objection,  I  will  keep  the  copy  of  the 
tabulated  statement  which  you  handed  to  me. 

Yours  truly, 

R.  W.  TAYLER. 


33 


April  16,  1910. 

Hon.  R.  W.  Tayler, 

United  States  Circuit  Court, 

City. 

Dear  Sir: — I  thank  you  for  your  favor  of  the  11th  inst., 
in  regard  to  the  valuation  of  the  Cleveland  Electric  property. 

In  your  oral  announcement  of  your  conclusions  as  arbi¬ 
trator,  you  stated  the  value  of  the  Cleveland  Electric  Railway 
Company  property  listed  in  schedules  A,  B,  C,  D,  E,  F, 
G,  H,  I,  J,  K  and  L  of  the  Goff-Johnson  appraisal,  including 
certain  specific  overhead  charges,  but  exclusive  of  any  general 
overhead  charge,  as  $15,175,565.28;  and  as  to  the  general 
overhead  charge  you  said  (page  2753  of  Mr.  Kruse’s  report), 
“I  have  undertaken,  as  best  I  can,  to  arrive  at  a  fair  statement 
of  what  is  the  general  overhead  charge  in  the  construction 
of  a  property  of  this  magnitude :  For  financing,  engineering, 
legal  expenses,  organization,  administration,  superintendence, 
interest  during  construction,  delays  not  covered  by  the  specific 
allowances,  consents,  litigation  with  property  owners,  inci¬ 
dentals  and  contingencies  not  applicable  to  specific  items,  fifteen 
per  cent,  making  the  total  actual  physical  value 
$17,510,305.62.” 

The  difference  between  $17,510,305.62  and  $15,175,565.28 
is  $2,334,740.34,  which  is  a  fraction  more  than  '15  per  cent 
of  $15,176,565.28.  I  have  been  unable  in  any  way  to  bring 
your  valuation  figures  to  a  sum  of  which  $2,334,740.34  is 
exactly  15  per  cent,  and  therefore  assume  that  you  meant  to 
add  this  sum,  rather  than  exactly  15  per  cent,  to  the  $15,- 
175,565.28  as  a  general  overhead  charge. 

34 


If  we  add  to  the . $2,334,740.34 

the  relatively  unimportant  error,  or  change,  of..  1,000.02 
and  the  amount  that  was  added  in  the  ordinance 

“to  equalize  stock  value” .  550.47 

we  get  a  total  of . $2,335,290.83 

which  should  be  distributed  among  the  several  schedules  of 
physical  property.  This  sum  is  15.4  per  cent  of  your  valua¬ 
tion  of  the  Cleveland  Electric  property. 

I  have  added  to  the  Forest  City  schedules,  in  like  manner, 
as  a  general  overhead  charge,  the  otherwise  unaccountable 
items  of  $71,114.77  and  $199,780.00,  near  the  foot  of  the 
column  of  itemized  Forest  City  values,  the  two  items  being 
18.18  per  cent  of  $1,490,445.99,  the  appraised  value  exclusive 
of  them,  and  exclusive,  of  course,  of  Schedule  M. 

I  hand  you  now  a  new  table,  showing  in  separate  columns 
the  value  of  the  Cleveland  Electric  and  Forest  City  properties 
in  the  several  schedules,  including  this  general  overhead 
charge,  and  the  total  value  of  the  property  of  the  two  com¬ 
panies. 

Please  note  that  the  general  overhead  charge  is  added  to 
schedule  J  and  K,  as  well  as  to  the  other  schedules.  Possibly 
you  did  not  intend  that  it  should  be  applied  to  these.  If  not, 
be  good  enough  to  let  me  know  and  I  will  make  the  correction. 

The  value  of  the  physical  property  being.  .$19,317,436.11 


and  the  value  of  the  franchises  being .  3,615,843.89 

the  total  value  appears  to  be . $22,933,300.00 


which  is  the  capital  value  stated  in  Section  16  of  the  franchise 
ordinance. 

If  there  is  no  error  in  these  figures,  I  mean  to  set  the 
property  up  on  the  Company’s  books  in  detail  as  I  have  shown 
it  on  the  accompanying  table. 

Very  truly  yours, 

H.  J.  DAVIES,  ’ 

Secretary. 


35 


« 

"o 


VO  VO  ^ 
Tf  CO  M 

d  ^ 

rH  (\) 

LO  lO  T-^ 

rd  >o  co 
(N  't  O'. 

oo  o  ’-q 
d  co  co 

x 


CO 

ro 

ro 

OC 

ro 

VO 

.  CM 

X 

1 — < 

•  c 

VO 

00 

»— 

T  H 

vf 

Cv 

.  X 

vq 

1—1 

■  °C. 

rd 

ro’ 

o 

Cvi 

rd 

r— " 

•  CO 

T  ■  i 

VC 

ro 

OC 

o 

Cv 

O 

i—l 

•  Cv] 

co  ; 

VO 

!  '+ 

VO 

CO 

p 

CM 

co^ 

•  X 

vo 

X  * 

•  OC 

d 

T— H 

▼—“< 

VO 

vd 

d 

i  CO 

id 

1—1 

•  vo 

co 

Cv) 

i— i 

X 

vo 

.  O' 

X 

1—1 

ro 

O 

Cv) 

T— « 

vC 

ro 

•  vf- 

T  • 

vo 

* 

•  vC 

r— ‘ 

d 

d 

CO 

in  ; 

:  cd 

&T 


8 

in 

id 

CM 


CO 

X 


"«  «» 

<0  <u 

-  § 

C3  ~ 

>  -C 

©  o 


vc  VC 

d  oo 
d  P 

T— (  O'' 

vo  GO 

«d  cm 

vt-  in 
VO  CO 

iPr 


VC 

vC 

X 

o 

i—i 

vC 

vC 

.  vo 

ro 

X 

X 

vl- 

IN. 

In 

On 

X 

’  d 

VC 

Cvi 

vd 

id 

d 

CO 

CO 

vd 

■  00 

id 

i^ 

X 

vC 

ro 

CM 

1^ 

VO 

vt- 

i—i 

°c 

ro 

CO 

ON 

vq 

rq 

X, 

;  in 

O 

vd 

rd 

vd 

Cv] 

vd 

OC 

vd 

.  vd 

vd 

Cv] 

X 

ro 

vC 

r— i 

VO 

viF 

•  vC 

CO 

vf 

X 

CO 

00 

o 

O' 

CO 

vd 

co 

CO 

of 

X 


es 

Z  ® 
< 

CL 


O 

o 


o 

o 

O'. 

vC 

VOi 

ro 

IN 

1^ 

& 

•  IN 

vo 

X 

ro 

T— 

O' 

Q 

o 

o 

rq 

vC 

ro 

M" 

o 

•  cq 

o 

CO 

X 

1—1 

X 

O 

o 

o 

t  1  i 

id 

vd 

vd 

ON 

O 

vd 

d 

d  | 

vd 

d 

vd 

rd 

O 

ro 

O'. 

Cn 

ro 

VO 

In 

"-r 

VO 

'  IN 

O 

vC 

ON 

VO 

O 

o 

vC 

^s 

CO 

CV] 

vd 

vd 

rq 

X 

X 

In 

ro 

*\ 

d: 

;  cq 
.  id 

vq 

of 

vq 

vd 

CO 

vd 

X 

°c 

vd 

IN 

id 

oo 

vC 

On 

X 

vo 

CM 

o 

•  CO 

VC 

In 

ro 

1 — < 

i—i 

CO 

r— » 

IN 

In 

X 

O 

▼— H 

rq 

ro 

•  M" 

1—. 

t— H 

rq 

VO 

p 

,-q 

vj- 

d 

of 

d 

d 

of 

1-0 

T— H 

of 

id 

rd 

CO 

x- 

X- 

X- 

DC 

Q 


> 

UJ 

_J 

o 

UJ 


o 

a 

XJ 


O)  O  ^  0C  ^  't 

^  K  ro  00  ^  io 

00  ro  Ov  N  O  0\ 

O',  in  vf 

ro  K  00 

O  d  O' 


VC‘  fN  r— I 

i-f  1-f  vd  CO 
vo  ro  vo  ^f 


VO 


vo 

•  O' 

CM 

ro 

vo 

1-H 

•  CM 

VO 

X 

ro 

rd 

'  x  ! 

o 

d 

ON  • 

‘  ro 

X 

VC 

vj-  | 

vq 

‘  IN 

vi¬ 

In 

CM 

d 

•  *• 

•  In  ; 

ed 

vd 

id 

i—i 

VO 

O) 

IN 

X 

vC 

vr 

T— < 

CM 

X 

X 

O  O  ^  VC;  1C  vo  >0  vo  Lr- 


vo 


UJ 


UJ 

z 

o 

t/5 


fO  O  O  >c-  M  co 
cm  o  o  q  o  on 

O  o  K  K  C\  O 
^  t\  OC  u~-  o  C 
»o  -q  0s.  cq  vq  on 

r-f  d  d  Co  InT  vo  vd 
^MfOcO'tQO^ 
00  K  q  q  00  Q  CM 

CO  i— I  CO  r-H  r— (  CO 

X 


V 


C 

tJO 

o3 

•  <u 

r" 

r-1 

• 

C- 

•  »— H 

CJ 

CJ 

a3 

5 

> 

Tj 

u 

'  Ld 

o 

• 

5— 

<C 

— 

rt 

03 

T— » 

d> 

> 

<|CQOQWwOKi — 1 


CJ 


u 


<u 


lei 


vj- 

ON 

CO 

VC 

00 

ON 

00 

CO 


cn 

cj 

c/3 


1~ 

cj 

> 


c/3 

CJ 

•  r“< 

« 

a3 

+J 

-+-> 

rt 

I 

CJ 

bJD 

CO 

» 

o 

-*-> 

W 


CJ 

1— 

c 

■*-> 

Ipl 

d 

I 


u 

-t-J 

cj 


CJ 

c/3 


•  In  VC 

\Q  O 

VC  vj- 

•  cq  In 

IN  O 

IN  CM 

’  d  id 

d  o 

d  vd 

•  in  vc 

X  ro 

i— i  00 

;  C>  I  n 

P  vq 

p  On 

.  In  d 

<d  Qn 

vt-  d 

.  O]  VO 

cm  O 

ro  vo 

.  vh  i— • 

rq_  1^ 

P  P 

vh 

id  X 

r— i 

r— i 

X 

X 

(Tj 

c  •  :  : 

’  cr. 

*  CJ 

d  •  C 

*  bjo 

_  •  CJ 

•  j— 

.  r~ 

•  oi 

2  :  d  : 

• 

•  CJ 

C«  •  ‘C 

.  rJ 

•  v,_,> 

d  •  3 

05 

v=r- 

<i 


<U 

_ _  r— 

co  l- 

-t->  <u 
r°  > 

*-  o 


£ 


a3 

-4— ‘ 

o 


c r. 

<u 

c/v 

Id 

CJ 

c 

cO 

u 


vC 

oC 

00 

0\ 

rd 

Csl 

x 


cO 

-i— i 

O 


36 


THE  FOREST  CITY  RAILWAY  COMPANY 


m 

r-O 

VC 

VO 

O 

LO 

oc 

rh 

T|- 

r-H 

O'. 

© 

CO 

Og 

CO 

eg 

•  tN. 

»n 

O 

00 

rg 

r— H 

X' 

o 

o 

o 

«/>  c 

eg" 

IO 

00 

ei 

r-H 

On 

▼-H 

r— I 

ei 

ON 

vd 

co 

sp 

u  w 

OJ  I4- 

Csl 

r  1 

H* 

00 

r-H 

rf- 

w 

r-H 

lO 

»o 

—h 

SP 

0 c 

<d  .r 
h-  (d 

On 

•» 

*“1 

O 

0> 

co 

t— H 

#> 

!  eh 

TT 

On 

vC 

(VJ 

Tf 

oo 

0 I 

m 

M 

H- 

(V) 

r-H 

CO 

T— I 

(VI 

•  eg' 

eg' 

On 

co* 

* 

td 

VO 

m 

w 

*  > 

T 

On 

CO 

On 

8 

r—l 

•  oc 

<VJ 

co 

On 

r-H 

LU 

LL 

cq 

r-H 

{X. 

CO 

VO 

•  00 

tJ- 

10 

r-  i 

CO 

#* 

3 

• 

o 

T3 

c 

3  0 
"•  H- 

10 

(vf 

CO 

r-H 

▼“H 

1—1 

■  eg' 

On 

CO* 

AS 

» 

S- 

g 

S' 


<o 

CO 

O- 

eg' 

ei 

«/> 


n 

o 


*o 

<d 


CD 


cd 


<55 


00 

T— H 

ej- 

tN, 

eh 

*  r-H 

co 

LO 

VO 

ef- 

Q 

Q 

00 

co 

r-H 

eg 

CO 

eh 

•  co 

VO 

ei 

r  < 

(Vj 

O 

O 

rd 

td 

eh 

ON 

rd 

id 

!  00 

ON 

oc 

0 

0 

ei 

ON 

00 

eg 

CO 

O, 

.  CN 

(V) 

eh 

O 

10 

Q 

O 

vO 

CO 

On 

eh 

On 

(V) 

eg 

< 

O 

eg 

vq 

O 

id 

00 

00' 

On 

LO 

•  vd 

r-H 

rd 

vd 

et* 

LO 

U~, 

eg 

G- 

co 

r— H 

co 

IX 

;  On 

hx 

■*h 

eh 

O 

O 

LO 

r-H 

LO 

r-H 

00 

oc 

- 

, _ ' 

(/> 

t 

m- 

CO 

VO 

Tt" 

eg 

00 

O 

• 

eh 

eg 

ix 

tN. 

l\ 

ON 

■cf 

CO 

oc 

.  co 

1 1 

eh 

oc 

tx 

eg 

On 

LO 

eh 

eg* 

0 

'  LO 

id 

r-H 

vd 

eh 

vC 

CN 

CO 

eh 

VO 

; 

LO 

LO 

CO 

On 

O 

vo 

00 

00 

On 

r-H 

O 

(V| 

O 

00 

O 

eg" 

eg' 

eg" 

vd 

no' 

■  o' 

O' 

rd 

o' 

00 

ei 

00 

(VI 

•  co 

r-H 

lx 

(VI 

</} 

S  g 

e  .2 
■=  -S 
°  = 

3=  « 

o  > 

cs 


eh 

(V] 

eg 

On 

p; 

•  'Cf 

ON 

■cj- 

vj- 

Tj- 

CO 

Q 

O 

r^\ 

1 

vO 

1 

00 

ON 

vo 

•  On 

rh 

00 

CO 

eg 

eg 

ev. 

O 

O 

§ 

LO 

rd 

06 

Tt- 

d 

vd 

!  eg 

d 

vd 

d 

On 

vd 

d 

O 

_• 

10 

eg 

00 

On 

On 

co 

.  eg 

On 

LO 

vo 

0 

oc 

LO 

lx 

O 

VO 

I'x 

CO 

.  O 

eg 

00' 

» 

T~1 

ei 

p 

lx 

vo 

vq 

o' 

’cf- 

vd 

vd 

CO* 

00* 

•  VO 

o' 

CN 

LO 

r-H 

On 

id 

1  r. 

G- 

eg 

LO 

1— ( 

co 

H- 

•  VO 

vO 

CO 

CO 

O 

*••4 

H- 

r-H 

H" 

r-H 

LO 

r-H 

00 

00 

^-1 

rH 

* 

C/3 

<u 

4-> 

03 

G 

•  H 
fH 

V) 

•  rH 

Vh 

•  rH 

J 

fH 

O 

03 

C/3 

03 

■*-» 

4_> 

Vh 
•  H 

G 

-*-> 

G 

<v 

CO 

bfl 

rO 

cfl 

O 

O 

X 

ccj 

rQ 

LU 

M 

O 

a 

a 

OJ 

> 

C/3 
»  . 

T3 

G 

G 

•  rH 

•  *H 

<U 

JG 

Vh 

<u 

G 

Vh 

G 

-4-> 

1 

Vh 

03 

£ 

03 

OjO 

03 

Vh 

-J 

Vh 

rt 

M 

cj 

V 

ai 

G 

> 

<u 

O 

O 

mmJ 

Q 

LU 

H 

1 

P 

I 

J 

PQ 

1 

O 

1 

P 

I 

-VJ 

c n 

X 

1 

1 

| 

0 

V) 

PQ 

1 

0 

Q 

W 

Eg 

0 

KH 

37 

o  G 

+J  03 


c/f  pl 

<  •  *H 


O  G 

co" 

O  cj1 

03 

^  W 

OJD 

CL 

^  3 

W  O 

Vh 

aJ 

rG 

C3 

03 

—  rH 

rO 

co 

qj  TO 

cd 

03 

Vh 

O  03 

-*->  0 
CO  co 

aj 

O 

JG 

Vh 

03 

> 

’cd 

H-> 

O 

co" 

«3 

CO 

•  rH 

jC 

cd 

-*-» 

0 

1  s 

H 

O 

(j 

rj 

H 

M  I 

.| 

I 

cd 

•Ad) 

L-H 

1 

5^ 

Vh 

Eg 

Cleveland,  April  21,  1910. 


Henry  J.  Davies,  Esq., 

Secretary,  The  Cleveland  Railway  Company, 

Cleveland,  Ohio. 

Dear  Sir: 

I  see  no  other  way  of  establishing  a  bookkeeping  system 
than  that  which  you  suggest. 

It  is  entirely  true  that  a  general  overhead  charge  such  as 
I  allowed  in  fixing  the  valuation  of  the  property  cannot  justly 
be  distributed  by  adding  the  same  percentage  to  all  of  the 
items.  It  is,  indeed,  hardly  separable  at  all.  The  fifteen  per 
cent  allowed  by  me  applied  to  the  entire  inventory  cost  of 
the  property,  and  might,  if  a  division  was  made,  differently 
apply  to  the  different  items.  At  all  events,  I  doubt  the  pro¬ 
priety  of  adding  the  fifteen  per  cent,  for  the  purpose  for  which 
you  must  deal  with  the  subject,  to  schedules  “J”  and  “K.” 
The  only  reason  for  distributing  the  overhead  charge  is  to 
furnish  a  basis  upon  which  to  determine  the  actual  amount  of 
betterments  added.  Applying  that  test,  it  is  evident  that 
Stores  and  Shop  Tools  ought  not  to  have  the  overhead  sepa¬ 
rately  applied. 

I  see  no  way  of  dealing  with  the  general  figures  other 
than  that  which  you  have  adopted.  The  general  overhead 
charge  which  I  added  was  fifteen  per  cent,  but,  as  I  have  often 
said  before,  I  arbitrarily  added  to  or  substracted  from  that, 
whichever  was  necessary,  in  order  to  equalize  the  stock  value. 

Yours  truly, 

R.  W.  TAYLER. 


38 


April  24,  1910. 


Hon.  R.  W.  Tayler, 

United  States  Circuit  Court, 

City. 

Dear  Sir: 

Your  favor  of  the  21st  inst.  was  duly  received. 

I  agree  with  you  that  the  overhead  charge  of  15  per  cent 
should  not  be  added  to  “stores.”  There  are,  however,  a  few 
items  in  the  J  and  K  schedule  of  the  Cleveland  Electric  prop¬ 
erty  to  which  it  should  be  applied,  namely,  the  items  of  shop 
tools  and  machinery,  appraised  at  $63,129.75. 

Let  ns  call  “shop  tools”  schedule  J,  and  “stores”  schedule 
K. 

The  Forest  City  schedules  do  not  seem  to  contain  any 
materials  or  supplies,  schedule  K  consisting  entirely  of  tools 
and  machinery  (see  page  332  of  the  printed  schedules).  The 
figures  in  my  table  of  The  Forest  City  valuations  are  there¬ 
fore  correct. 

Your  valuation  (excepting  15  per  cent  for  overhead 
charges)  of  all  Cleveland  Electric  property  was  $15,175,565.28 
From  this  amount  deduct  schedule  K,  stores.  .  363. 944.62 


and  there  is  left  a  remainder  of . $14,811,620.66 

to  which  are  to  be  added  overhead  charges  of  $2,336,290.83 
(15.77%). 


0112  098219238 


Add  15.// Of  to  each  of  I  lie  Cleveland  Electric  schedules 
except  K,  and  the  following  appears  as  the  total  valuation  by 
schedules  of  the  two  properties : 


Schedule. 

A — Track  . 

B — Pavement 

C — Cars  . 

D — Land  . 

E — Buildings  . 

F — Overhead  Con¬ 
struction  . 

G — Return  Circuit. 
H — Power-stations 
I — Storage- 

batteries  .... 

T — Shop  tools  .... 

K- — Stores  . 

L — Misc.  Rolling- 

stock  . 

M — Other  items  .  . 


Cleveland 

Electric. 

$4,839,326.62 

2,052.233.37 

3.202,628.59 

1,379,089.60 

1,024,752.13 

1.224,293.68 

115,981.15 

2,695,019.21 

352,363.2 9 
73,087.44 
363,944.62 

188,136.41 


Forest 

City. 

$520,627.87 

147,397.38 

538,984.11 

18.429.24 
39,937.37 

( 

(175,297.44 

( 

196,198.31 

71.229.63 

47.148.25 


6,091.16 

44,259.24 


Total. 

$5,359,954.49 

2,199,630.75 

3.741,612.70 

1.397,518.84 

1.064,689.50 

( 

(1.516.572.27 

( 

2.891,217.52 

423,592.92 

120,235.69 

363.944.62 

194.227.57 

44.259.24 


Total  . 

Franchises  . 


$17,511,856.11  $1,805,600.00  $19,317,456.11 
3,615.843.89  .  .  .• .  3,615,843.89 


Total  . $21,127,700.00  $1,805,600.00  $22,933,300.00 

Very  truly  yours, 

IT  J.  DAVIES, 
Secretary. 


40 


